Archive for June, 2010
The mortgage-broker and real-estate industries are pushing to have a measure that would kill new home-appraisal rules inserted into pending legislation to overhaul financial-sector regulation.
The Home Valuation Code of Conduct, adopted in May 2009 to ensure appraiser independence, bars mortgage brokers and bank loan officers from selecting appraisers.
As part of the agency's continuing crackdown on scams that prey on financially distressed homeowners, the Federal Trade Commission announced legal actions against more than a dozen marketers accused of pitching bogus mortgage modification or foreclosure relief services.
FTC settlement orders ban 16 marketers from the mortgage modification or foreclosure relief business.
Three equity orders that pushed Washington Post shares up 99% in less than one second yesterday show why the Securities and Exchange Commission began a program this month to halt stocks during times of volatility.
Since taking office at the height of the financial crisis, President Obama has promised to hold Wall Street accountable for the meltdown. Attorney General Eric Holder Jr reinforced that message in November when he vowed to prosecute Wall Street executives and others responsible for the crisis.
"We will be relentless in our investigation of corporate and financial wrongdoing and we will not hesitate to bring charges," Holder said.
Since the launch of a national mortgage fraud enforcement campaign on March 1, federal efforts led to 485 arrests nationwide, making it the largest-ever collective enforcement initiative against mortgage fraud.
The effort, dubbed "operation stolen dreams," is headed up by US Attorney General Eric Holder, Federal Bureau of Investigation (FBI) director Robert Mueller III and Housing and Urban Development – Office of Inspector General (HUD-OIG) Kenneth Donohue.
The mortgage fraud crack-down has uncovered 1,215 criminal defendants nationwide — including 485 arrests — who are allegedly responsible for more than $2.3bn in losses.
To date, the operation resulted in 191 civil enforcement actions resulting in the recovery of more than $147m:
"The last several years have seen enormous and damaging developments in the mortgage and housing markets, and the government has stepped in to bolster unstable marketplaces and devastated communities," said HUD-OIG's Donohue in a statement.
"From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy," said the FBI's Mueller. "Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice."
The types of alleged mortgage fraud cases uncovered and investigated include builder bailout schemes, where builders establish relationships with unlicensed mortgage brokers to "sell" homes to straw buyers at inflated prices. Fraudulent schemes also involved "ghost loans" where straw buyers misleadingly obtain loans on properties that have multiple unrecorded liens without the other lender's knowledge.
Reverse mortgage schemes often prey upon elderly homeowners by profiting on phantom equity. Other mortgage fraud cases involving loan modification sometimes lead to homeowners who think they are only refinancing to actually end up signing over their homes.
As the breeds of mortgage fraud grow more exotic and damaging, federal investigations are also picking up.
The number of mortgage fraud suspicious activity reports referred to law enforcement grew 5% during fiscal year 2009 to 67,190, according to the latest yearly mortgage fraud report from the FBI.
Write to Diana Golobay.
Fueled by federal tax credits and low interest rates, Bay Area sales took off in some of the region’s costlier neighborhoods last month, helping push the median home price there above $400,000 for the first time since the US was gripped by the financial crisis 21 months ago.
First-time buyers found fewer foreclosed homes for sale in the region last month, the San Diego real estate research firm MDA DataQuick said Thursday.
The US attorney's office in Los Angeles has announced criminal and civil actions across Southern California as part of a nationwide crackdown on mortgage fraud.
US attorney Andre Birotte said Thursday that federal prosecutors have filed criminal cases charging about three dozen defendants, and the civil division has filed five lawsuits alleging mortgage fraud.
Chancellor of the Exchequer George Osborne said he will abolish the Financial Services Authority (FSA) and give most of its power to the Bank of England, undoing the regulatory system set up by Gordon Brown in 1997.
In the most sweeping changes to financial regulation since then, the watchdog will be wound down and replaced by three bodies over the next two years, the chancellor said.
The number of suspected mortgage fraud activities reported to law enforcement grew 5% during fiscal year 2009 to 67,190, according to the latest yearly mortgage fraud report from the Federal Bureau of Investigation (FBI).
FBI mortgage fraud pending investigations rose 71% from fiscal year 2008, while Department of Housing and Urban Development – Office of Inspector General (HUD-OIG) pending investigations rose 31% in the same time. Of all pending FBI mortgage fraud investigations during FY 2009, 66% involved dollar losses totaling more than $1m.
Additionally, the FBI estimates $14bn in fraudulent loans originated in 2009.
The top five states for mortgage fraud during 2009 were California, Florida, Illinois, Michigan and Arizona:
"[T]he distressed economy witnessed during 2009 is expected to persist through 2011, and the housing market, despite increased scrutiny of mortgage loan originations and recent government stimulus interventions, is expected to remain volatile for the same period," the FBI wrote in its report. "This will continue to provide a favorable environment for expanded mortgage fraud activity … which means law enforcement may not realize a downturn in fraud reporting until 2013."
The FBI noted more than 2.8m properties had foreclosure filings in 2009, a 120% increase from two years earlier. From 2008 through 2009, Congress passed various stimulus packages and foreclosure prevention programs, but according to the FBI each has potential fraud vulnerabilities.
"Vulnerabilities associated with these and similar programs include the lack of transparency, accountability, oversight, and enforcement that predisposes them to fraud and abuse," the FBI said. "These vulnerabilities could potentially lead or contribute to an increase in government, mortgage, and corporate frauds, as well as public corruption."
Among prevalent mortgage fraud schemes in 2009 were loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, illegal property flipping, reverse mortgage fraud and loan modification. And loan modification fraud will continue as an ongoing concern in light of the volume of distressed borrowers.
"As mortgage industry employment opportunities contract in response to the aforementioned market stressors, industry participants are migrating from subprime lending to loan modification companies and [Federal Housing Administration] lenders," the FBI said. "There is a concern that loan modification companies and government-insured lenders are managed and/or operated by corrupt individuals or are employing those formerly involved in fraudulent subprime lending activities."
The FBI also announced today the results of the broadest-ever mortgage fraud sweep, involving 1,215 criminal defendants nationwide — including 485 arrests — who are allegedly responsible for more than $2.3bn in losses.
Write to Diana Golobay.
David Levy is the vice president at Lender Processing Services Auction Solutions. LPS entered the REO auction business in October 2009 when it acquired the Chicago-based Rising Tide Auctions. They’ve since moved the auction site to the Internet, hosting one in April and another in May.
For this edition of In This Corner, Levy explains why the industry needs to improve technology to keep up with the rising tide of foreclosures.
How effective are auctions for disposing the REO inventory? Are sales prices usually higher on the auction block than in the traditional REO process?
Known to be fast and fair, the auction approach is an effective way for REO managers to sell a lot of inventory quickly for a price that truly reflects market value. Auctions are beneficial for both buyers and sellers, and provide sellers with the opportunity to differentiate themselves from similar, competing properties. By setting an auction date, sellers also give prospective buyers a very specific timeline in which they need to act, which prompts them to make a decision if they are interested in a property. Aside from motivating buyers, auctions also generate a database of individuals who express interest in auction properties, giving REO managers a well-defined group of prospects to target for future auctions.
Auctions are a great means of price discovery. Auction pricing is on an asset-by-asset basis, typically reflecting the quality of the asset. When list prices have been managed closely, the auction process has the potential to yield much higher results than might be anticipated in a standard REO sales process. It really depends on the asset being priced right to maximize results.
The shadow inventory of foreclosures could take as long as four years to move through, according to Morgan Stanley. Does the REO industry currently have the technology in place to pick up the sales pace to keep this inventory from sending the market into another tailspin? Or will more upgrades need to be done?
As the industry stands now, it can handle the current inventory, but continuous improvements are a must. Last year we saw the REO industry dispose of a tremendous number of assets and we are equipped to handle the next influx. But the numbers are going to escalate. Technology upgrades will help the industry stay on top of market growth and fluctuations while trying to accomplish multiple objectives – such as finding not only buyers but owner-occupants for properties to help resurrect blighted neighborhoods. Program development geared towards expanding the pool of potential buyers will drive better recoveries.
In addition to technology upgrades, the industry is going to have to become savvier about how to manage the flow of assets to market so we not only keep up with the pace we had last summer but improve performance across all key metrics .
How does the new online auction platform make the liquidation process easier?
The LPS Auction Solutions platform makes the online auction process easier for consumers, investors and sellers. Buyers are able to shop from the comfort of their home, viewing a variety of properties and making offers at any time. Online auctions are also beneficial for buyers who are looking to bid on properties that are outside of their immediate area, region or even country. Likewise, investors have a more efficient experience when using the LPS Auction Solutions platform because it allows them to leverage their time when bidding on multiple assets. It is advantageous for sellers because it allows them to auction properties beyond of a specific geographic concentration.
